AARP Growth Trust
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
September 7, 1998
Xxxxxxx Xxxxxx Investments, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Investment Management Agreement
AARP Balanced Stock and Bond Fund
AARP Capital Growth Fund
AARP Global Growth Fund
AARP Growth and Income Fund
AARP International Growth and Income Fund
AARP Small Company Stock Fund
Ladies and Gentlemen:
AARP Growth Trust (the "Trust") has been established as a Massachusetts
business trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees has divided the Trust's shares of
beneficial interest, par value $0.01 per share, (the "Shares") into separate
series, or funds (each a "Fund" and, collectively, the "Funds"). Series may be
abolished and dissolved, and additional series established, from time to time by
action of the Trustees.
The Trust, on behalf of the Funds, has selected you to act as the sole
investment manager of the Funds and for each series that may subsequently be
authorized by the Trustees (unless otherwise provided at the time and subject to
such conditions and amendments to this Agreement as shall be mutually agreed
upon), and to provide certain other services, as more fully set forth below, and
you have indicated that you are willing to act as such investment manager and to
perform such services under the terms and conditions hereinafter set forth.
Accordingly, the Trust on behalf of the Funds agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of
investing and reinvesting the assets of the Funds in the manner and in
accordance with the investment objectives, policies and restrictions specified
in the currently effective Prospectus (the "Prospectus") and Statement of
Additional Information (the "SAI") relating to each Fund included in the Trust's
Registration Statement on Form N-1A, as amended from time to time, (the
"Registration Statement") filed by the Trust under the Investment Company Act of
1940, as amended, (the "1940 Act") and the Securities Act of 1933, as amended.
Copies of the documents referred to in the preceding sentence have been
furnished to you by the Trust. The Trust has also furnished you with copies
properly certified or authenticated of each of the following additional
documents related to the Trust and the Fund:
(a) The Declaration dated September 13, 1996, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders of each Fund
selecting you as investment manager and approving the form of this
Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial Interest
dated November 12, 1996 relating to the Funds.
The Trust will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the
Funds, you shall provide continuing investment management of the assets of the
Funds in accordance with the investment objectives, policies and restrictions
set forth in the Prospectus and SAI; the applicable provisions of the 1940 Act
and the Internal Revenue Code of 1986, as amended (the "Code"), relating to
regulated investment companies and all rules and regulations thereunder; and all
other applicable federal and state laws and regulations of which you have
knowledge; subject always to policies and instructions adopted by the Trust's
Board of Trustees. In connection therewith, you shall use reasonable efforts to
manage each Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Funds shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Funds in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Trust or counsel to
you. You shall also make available to the Trust promptly upon request all of a
Fund's investment records and ledgers as are necessary to assist the Trust in
complying with the requirements of the 1940 Act and other applicable laws. To
the extent required by law, you shall furnish to regulatory authorities having
the requisite authority any information or reports in connection with the
services provided pursuant to this Agreement which may be requested in order to
ascertain whether the operations of the Trust are being conducted in a manner
consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments,
currencies, repurchase agreements, futures, options and other contracts relating
to investments to be purchased, sold or entered into by the Funds and place
orders with broker-dealers, foreign currency dealers, futures commission
merchants or others pursuant to your determinations and all in accordance with
Fund policies as expressed in the Registration Statement. You shall determine
what portion of each Fund's portfolio shall be invested in securities and other
assets and what portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on
the investment performance of the Funds and on the performance of your
obligations pursuant to this Agreement, and you shall supply such additional
reports and information as the Trust's officers or Board of Trustees shall
reasonably request.
2
3. Administrative Services. In addition to the portfolio management
services specified above in section 2, you shall furnish at your expense for the
use of the Funds such office space and facilities in the United States as the
Funds may require for their reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Trust administrative services
on behalf of the Funds necessary for operating as open-end investment companies
and not provided by persons not parties to this Agreement including, but not
limited to, preparing reports to and meeting materials for the Trust's Board of
Trustees and reports and notices to Fund shareholders; supervising, negotiating
contractual arrangements with, to the extent appropriate, and monitoring the
performance of, accounting agents, custodians, depositories, transfer agents and
pricing agents, accountants, attorneys, printers, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be necessary or
desirable to Fund operations; preparing and making filings with the Securities
and Exchange Commission (the "SEC") and other regulatory and self-regulatory
organizations, including, but not limited to, preliminary and definitive proxy
materials, post-effective amendments to the Registration Statement, semi-annual
reports on Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act;
overseeing the tabulation of proxies by the Funds' transfer agent; assisting in
the preparation and filing of each Fund's federal, state and local tax returns;
preparing and filing each Fund's federal excise tax return pursuant to Section
4982 of the Code; providing assistance with investor and public relations
matters; monitoring the valuation of portfolio securities and the calculation of
net asset value; monitoring the registration of Shares of each Fund under
applicable federal and state securities laws; maintaining or causing to be
maintained for each Fund all books, records and reports and any other
information required under the 1940 Act, to the extent that such books, records
and reports and other information are not maintained by the Fund's custodian or
other agents of the Fund; assisting in establishing the accounting policies of
each Fund; assisting in the resolution of accounting issues that may arise with
respect to each Fund's operations and consulting with each Fund's independent
accountants, legal counsel and other agents as necessary in connection
therewith; establishing and monitoring each Fund's operating expense budgets;
reviewing each Fund's bills; processing the payment of bills that have been
approved by an authorized person; assisting each Fund in determining the amount
of dividends and distributions available to be paid by each Fund to its
shareholders, preparing and arranging for the printing of dividend notices to
shareholders, and providing the transfer and dividend paying agent, the
custodian, and the accounting agent with such information as is required for
such parties to effect the payment of dividends and distributions; and otherwise
assisting the Trust as it may reasonably request in the conduct of each Fund's
business, subject to the direction and control of the Trust's Board of Trustees.
Nothing in this Agreement shall be deemed to shift to you or to diminish the
obligations of any agent of a Fund or any other person not a party to this
Agreement which is obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 4, you shall pay the compensation and expenses of all
Trustees, officers and executive employees of the Trust (including each Fund's
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Funds, the services of such of your directors,
officers and employees as may duly be elected officers of the Trust, subject to
their individual consent to serve and to any limitations imposed by law. You
shall provide at your expense the portfolio management services described in
section 2 hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of a Fund other than
those specifically allocated to you in this section 4. In particular, but
without limiting the generality of the foregoing, you shall not be responsible,
except to the extent of the reasonable compensation of such of a Fund's Trustees
and officers as are directors, officers or employees of you whose services may
be involved, for the following expenses of each Fund: organization expenses of
the Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants;
3
legal expenses; auditing and accounting expenses; maintenance of books and
records which are required to be maintained by the Fund's custodian or other
agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates and, except as provided below in this section 4, other expenses in
connection with the issuance, offering, distribution, sale, redemption or
repurchase of securities issued by the Fund; expenses relating to investor and
public relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; costs of
shareholders' and other meetings; and travel expenses (or an appropriate portion
thereof) of Trustees and officers of the Trust who are directors, officers or
employees of you to the extent that such expenses relate to attendance at
meetings of the Board of Trustees of the Trust or any committees thereof or
advisors thereto held outside of Boston, Massachusetts or New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of a Fund if and to the extent
that (i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Fund's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Trust on behalf of the Fund shall have adopted a plan in
conformity with Rule 12b-1 under the 1940 Act providing that the Fund (or some
other party) shall assume some or all of such expenses, or (iii) such expenses
are required to be borne by Xxxxxxx pursuant to section 4 of the Investment
Company Services Agreement, dated as of October 8, 1984 among American
Association of Retired Persons, AARP/Xxxxxxx Financial Management Company, and
us. You shall be required to pay such of the foregoing sales expenses as are not
required to be paid by the principal underwriter pursuant to the underwriting
agreement or are not permitted to be paid by the Fund (or some other party)
pursuant to such a plan.
5. Management Fee. For all services to be rendered, payments to be made
and costs to be assumed by you as provided in sections 2, 3 and 4 hereof, the
Trust on behalf of the Funds shall pay you on the last day of each month the
unpaid balance of a fee composed of an asset charge in two parts.
(a) The asset charge for each calendar day of each year shall be
equal to the total of 1/365th (1/366th in each leap year) of the amount computed
in accordance with paragraphs (b) and (c) below. The computation shall be made
for each such day on the basis of net assets as of the close of business of the
full business day one (1) business day prior to the day for which the
computation is being made. In the case of the suspension of the computation of
net asset value, the asset charge for each day during such suspension shall be
computed as of the close of business on the last full business day on which the
net assets were computed. As used herein, "net assets" as of the close of a full
business day shall include all transactions in shares of each Fund recorded on
the books of each Fund for that day.
(b) The base fee rate part of the fee shall be based on the
average daily net assets of all funds within the AARP Investment Program from
Xxxxxxx (the "Program"), including any new fund
4
which may be organized in the future. The base fee rate will be the percent of
Program net assets as set forth in the following table.
Base Fee Rate
----------------------------------------------------------------------
Program Assets Annual Rate at Each
(Billions) Asset Level
----------------------------------------------------------------------
First $2 0.35%
----------------------------------------------------------------------
Next $2 0.33%
----------------------------------------------------------------------
Next $2 0.30%
----------------------------------------------------------------------
Next $2 0.28%
----------------------------------------------------------------------
Next $3 0.26%
----------------------------------------------------------------------
Next $3 0.25%
----------------------------------------------------------------------
Over $14 0.24%
----------------------------------------------------------------------
The portion of the base fee rate which each Fund shall bear will be the
same percentage of the base fee rate as its net assets are to the total net
assets of all the Program funds.
(c) The fund fee rate part of the fee shall be 0.19 percent per annum
of net assets of AARP Balanced Stock and Bond Fund, 0.19 percent per annum of
net assets of AARP Growth and Income Fund, 0.55 percent per annum of net assets
of AARP Global Growth Fund, 0.32 percent per annum of net assets of AARP Capital
Growth Fund, 0.60 percent per annum of the net assets of AARP International
Growth and Income Fund and 0.55 percent per annum of the net assets of AARP
Small Company Stock Fund.
The value of net assets of the Trust or any Fund shall be determined
pursuant to the applicable provisions of the Declaration, By-Laws and
Registration Statement of the Trust. If, pursuant to such provisions, the
determination of net asset value for any Fund is suspended for any particular
business day, then for the purposes of this paragraph 5, the value of the net
assets of that series of the Trust as last determined shall be deemed to be the
value of the net assets as of the close of the New York Stock Exchange, or as of
such other time as the value of the net assets of the portfolio of that Fund may
lawfully be determined, on that day. If the determination of the net asset value
of the shares of any Fund of the Trust has been suspended pursuant to the
Declaration, By-Laws or Registration Statement of the Trust for a period
including such month, your compensation payable at the end of such month shall
be computed on the basis of the value of the net assets of the Trust as last
determined (whether during or prior to such month). If a Fund determines the net
asset value of its portfolio more than once on any day, then the last such
determination thereof on that day shall be deemed to be the sole determination
thereof on that day for the purposes of this section 5.
You may waive all or a portion of your fees provided for hereunder and
such waiver shall be treated as a reduction in purchase price of your services.
You shall be contractually bound hereunder by the terms of any publicly
announced waiver of your fee, or any limitation of a Fund's expenses, as if such
waiver or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of a Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for each Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise
5
in which you give any advice to clients of yours concerning the Shares of a
Fund, you shall act solely as investment counsel for such clients and not in any
way on behalf of the Fund.
Your services to the Trust and each Fund pursuant to this Agreement are
not to be deemed to be exclusive and it is understood that you may render
investment advice, management and services to others. In acting under this
Agreement, you shall be an independent contractor and not an agent of the Trust
or a Fund. Whenever a Fund and one or more other accounts or investment
companies advised by the Manager have available funds for investment,
investments suitable and appropriate for each shall be allocated in accordance
with procedures believed by the Manager to be equitable to each entity.
Similarly, opportunities to sell securities shall be allocated in a manner
believed by the Manager to be equitable. Each Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the Trust agrees that
you shall not be liable under this Agreement for any error of judgment or
mistake of law or for any loss suffered by a Fund in connection with the matters
to which this Agreement relates, provided that nothing in this Agreement shall
be deemed to protect or purport to protect you against any liability to the
Trust, a Fund or its shareholders to which you would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of your duties, or by reason of your reckless disregard of your obligations and
duties hereunder. Any person, even though also employed by you, who may be or
become an employee of and paid by a Fund shall be deemed, when acting within the
scope of his or her employment by the Fund, to be acting in such employment
solely for the Fund and not as your employee or agent.
8. Duration and Termination of This Agreement. This Agreement shall
remain in force until August 31, 1999, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or, with respect to each Fund, by the vote of a
majority of the outstanding voting securities of such Fund of the Trust. The
aforesaid requirement that continuance of this Agreement be "specifically
approved at least annually" shall be construed in a manner consistent with the
1940 Act and the rules and regulations thereunder and any applicable SEC
exemptive order therefrom.
This Agreement may be terminated with respect to a Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Trust's Board of Trustees on 60 days'
written notice to you, or by you on 60 days' written notice to the Trust. This
Agreement shall terminate automatically in the event of its assignment.
9. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
6
10. Limitation of Liability for Claims. The Declaration, a copy of
which, together with all amendments thereto, is on file in the Office of the
Secretary of The Commonwealth of Massachusetts, provides that the name "AARP
Growth Trust" refers to the Trustees under the Declaration collectively as
Trustees and not as individuals or personally, and that no shareholder of any
Fund of the Trust, or Trustee, officer, employee or agent of the Trust, shall be
subject to claims against or obligations of the Trust or of any Fund of the
Trust to any extent whatsoever, but that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability
as set forth in the Declaration and you agree that the obligations assumed by
the Trust on behalf of each Fund pursuant to this Agreement shall be limited in
all cases to the applicable Fund and its assets, and you shall not seek
satisfaction of any such obligation from the shareholders or any shareholder of
the Fund or any other series of the Trust, or from any Trustee, officer,
employee or agent of the Trust. You understand that the rights and obligations
of each Fund, or series, under the Declaration are separate and distinct from
those of any and all other series.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions
contained in Section 2(a) of the 1940 Act (particularly the definitions of
"affiliated person," "assignment" and "majority of the outstanding voting
securities"), as from time to time amended, shall be applied, subject, however,
to such exemptions as may be granted by the SEC by any rule, regulation or
order.
This Agreement shall be construed in accordance with the laws of The
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause a
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or
management agreements entered into between you and the Trust on behalf of the
Funds.
7
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
AARP GROWTH TRUST, on behalf of
AARP Balanced Stock and Bond Fund
AARP Capital Growth Fund
AARP Global Growth Fund
AARP Growth and Income Fund
AARP International Growth and Income Fund
AARP Small Company Stock Fund
By: /s/Xxxxxx X. XxXxxxxxx
-----------------------
Vice President
The foregoing Agreement is hereby accepted as of the date hereof.
XXXXXXX XXXXXX INVESTMENTS, INC.
By: /s/Xxxxxx Xxxxxx
-----------------------
Managing Director
